Weekend reflections

It’s time again for weekend reflections, which makes space for longer than usual comments on any topic. As always, civilised discussion and no coarse language. I’ve cut off a thread-derailing discussion of the Pinochet dictatorship on another post, but those so inclined can go at it here, bearing in mind the comments policy and the requirement for civility.

Grsist to the mill of those who don’t like him already, but others will find ways of living with it if not justifying it. Americans like winning stuff as much as anyone else and this may prompt some to work harder to support his agenda.

John, it seems Obama’s biggest headache will now be reducing the ‘trade deficit’ for in 2009 imports will be cutting some $400 billion off GDP. But the true cost of the ‘trade deficit’ over the last decade has been the resulting $1.5 trillion shrinking of the economy. And Obama must find ways to create more demand for USA made goods and service to correct the imbalance in the trade deficit whereby imports are exceeding exports otherwise the US recession will just drag on.

Perhaps, the issue is that Europe (and the world) are simply thankful to see any decent President after Bush. However, Obama’s peace prize is a joke no matter what way you look at it. He has done nothing and can never do anything. Is there peace yet in Afghanistan, Iraq or Israel/Palestine?

The bottom line is that no individual can create peace and national figureheads are no different in this regard. They are as powerless as the rest of us against the mass forces of history. The very idea of the prize is based upon a series of misconceptions about the nature of history.

Just over 2 weeks ago, the UN Environment Program put out a media release about the latest climate science, clearly timed to contribute to the G20 meeting in Pittsburgh.

The media release announced findings from the Climate Change Science Compendium 2009, which reviews 400 major scientific works on earth systems and climate released through peer-reviewed literature or from research institutions over the last three years, since the close of research for consideration by the IPCC Fourth Assessment Report, the current global scientific benchmark.

Amazingly, 16 days later, Google shows that there have been only 37 media mentions of the Compendium from the whole world – and some of them are derisory comments from sceptics. While the wire services did carry the story, it seems that the only major English-laguage papers to cover it are WaPo, Globe and Mail, and the Telegraph.

This is amazing because the Compendium shows that the observed reality of climate change is unfolding at or above the most pessimistic projections of the IPCC, and events such as glacier and ice sheet melting are exceeding predictions.

Amongst the significant points:

* Losses of tropical and temperate mountain glaciers affect perhaps 20 percent to 25 percent of the global human population in terms of drinking water, irrigation and hydro-power.
* The growth in carbon dioxide emissions from energy and industry has exceeded even the most fossil-fuel intensive scenario developed by the IPCC at the end of the 1990s. Global emissions were growing by 1.1 percent each year from 1990-1999 and this accelerated to 3.5 percent per year from 2000-2007.
* Growth of the global economy in the early 2000s and an increase in its carbon intensity (emissions per unit of growth), combined with a decrease in the capacity of ecosystems on land and the oceans to act as carbon “sinks”, have led to a rapid increase in the concentrations of carbon dioxide in the atmosphere. This has contributed to sooner-than-expected impacts including faster sea-level rise, ocean acidification, melting Arctic sea ice, warming of polar land masses, freshening of ocean currents and shifts in the circulation patterns of the oceans and atmosphere.
* Until the summer of 2007, most models projected an ice-free September for the Arctic Ocean towards the end of the current century. Reconsideration based on current trends has led to speculation that this could occur as soon as 2030.

It appears that all the journalists were so focussed on watching what the G20 leaders said they would do about climate change to actually notice the change that has been happening.

Ikonoclast, I forgot to mention Canadian Prime Minister Stephen Harper also thinks Obama is worthy of such an award saying “I think it’s a tremendous award to somebody who has obviously accomplished a great deal in his life’.

by keeping Sarah Palin out of the White House, Obama may have done more for world peace than any other living human, and…
it’s not so much Obama winning the Peace Prize, as Bush winning the “F#ck You” Prize.

Has anyone considered the opening of the north west passage as a future contributor to global trade and growth?

of course people have, and there’s a very long (and very disturbing) New York Times article from a couple of years ago on it if you’d care to look it up. having said that, only an outright psychopath (or perhaps a wanton message-board troll) would regard worldwide crop failures, mass starvation, and the displacement of literally millions of people due to rising sea levels as somehow a worthwhile trade off for the opening of some polar sea lanes.

Canberra Boy #6, the post immediately following yours #7 illustrates the inanity we’re up against. Keep fighting the good fight but make survival plans. I don’t know what forces are preventing the Media from reporting the full extent of the peril Humanity faces but they will be held to account one day.

“Imagine”, says US academic Robert McChesney, “the federal government had issued an edict demanding that there be a sharp reduction in international journalism, or that local newsrooms be closed or their staffs and budgets slashed. Imagine if the president had issued an order that news media concentrate upon celebrities and trivia, rather than rigorously investigate and pursue scandals and lawbreaking in the White House… Professors of journalism and communication would have gone on hunger strikes… entire universities would have shut down in protest. Yet, when quasi-monopolistic commercial interests effectively do pretty much the same thing, and leave our society as impoverished culturally… it passes with only minor protest in most journalism and communication programmes”.

@Salient Green
One possible reason that it wasn’t reported is that it wasn’t seen as news: everybody who is even slightly aware of the facts knows that climate change is unfolding faster and worse than predicted. UNEP puts out a report with evidence from hundreds of scientists? So what?

Obama has been pretty peaceful. Sure he is waging a war in Afghanistan but that’s a “good war” and he didn’t start it and he is trying to thump the bad guys good and hard (may they rest in peace) so that the Afghan people can live in peace. And Obama brought peace to the minds of millions of Democrats that were going to go completely bonkers if the republicans won the presidency again. If Obama can avoid starting any new wars then next year I think he should get the peace prize again.

Update, Update, Update yesterday former Liberal Party Director was highly critical of the way many WA Liberals are conducting themselves and the damage they are doing to the Party. But something tells this is more of a power struggle between the East v West Liberal factions rather than just Turnbull’s position on climate change.

@TerjeP (say tay-a)
That’s a pretty low hurdle, Terje. Robert Mugabe and Kim Jong Il would have no difficulty meeting that criterion. Perhaps, then, all world leaders should get one, except those actually starting wars. We could all then talk about those few who failed to win the prize.

Obama wins peace prize as the US cuts $800 million from its food aid budget over last year.

During that year the number of people in need of food aid has increased by 150 million.

The cuts to the US contribution to the world food program represents three quarters of Goldman Sach’s $1.2 billion in government-funded executive bonuses for the year!!!

Head of UN world food program warns that millions will starve:

“There is a silent tsunami [of hunger] gathering. You cannot see or hear it, but it’s in all these villages, killing people just as hard. This is the worst food crisis since the 1970s. We will lose a generation. Children will never recover,”

Well now might be a good time for them to consider growing their own food, instead of hacking each other to death with machetes/having socialist revolutions/waging guerrilla warfare/carrying out 5-year plans etc etc, all carried out with the implicit blessing of the radical left.

Or maybe they could take the advice of the Keynesians, and start “demanding” more, to stimulate aggregate demand. Oh, wait a second, they can’t – because they haven’t produced anything! What a spanner in the works, you know, having to produce goods which are then exchanged for other goods – sounds like one of those radical “Austrian” ideas…

Although $1.2 billion certainly sounds like a lot, it’s not much compared to the $700 billion that the US government pissed up the wall in the name of “stimulating” the economy (not to mention Australia’s own $42 billion vote-buying scheme). Oh, those poor US citizens, with their falling aggregate demand – quick, get the economic defibrillator, stat! We can’t have these rich Westerners stop buying SUVs and TV sets, or else the world economy would collapse!

Tax payer-financed bailouts suck, but you guys are the ones asking for more government redistribution, and then you chuck a tantrum when it inevitably ends up going to the people with the greatest political clout (who neither need nor deserve it). “Oh, but if only we had the right people in charge…”

Also, the UN should shut up and get back to doing what it does best, i.e. rigging elections in Afghanistan.

A hint, Sebastian. You’re on the losing side of the debate, and snarks like the above aren’t going to help you. Try arguing in a way that might actually convince people. One thing that won’t work at all well (believe me on this) is the libertarian version of “communism didn’t fail, it was never really tried”.

@Sebastian
Ill second JQs comments Sebastian and Ill go so far as to suggest you really dont know what you want…but Ill try to help. What you dont want is an unconstrained state run economy. What else you dont want is an unconstrained market run economy. What you do want is an economy run according to the rule of law. One thing I have noticed is that liberalists make the mistake of presupposing that deregulation delivers more power to individuals or businesses and diverts power away from governments. They have a very narrow view on that. De-regulation often makes possible greater corruption of governments by making permissable more actions than would otherwise exist (in other words delivers more power to governments) …so instead of deregulation delivering freedom to individuals it may deliver an even worse state oppression. This liberalists conveniently ignore in arguing their one cure for all diseases. There is no cure except effective rule of law and regulation Sebastian. You may harp on all you like about the left and communism but your knowledge barely touches the surface. The communist state of Russia under Stalin was no such thing. It was closer, far closer to fascism – and it was NO different to the same fascism that emerged with the McCarthy trials in the US. Are you hearing me Sebastian??. Do you think the russians wanted to live like that anymore than innocents were persecuted by McCarthyism in the United States??. The lesson here is that there were no communist enemies – that fear is a method of control and that invariably it emerges from leaders seeking control. The left right argument is sham, for all the division that has been caused in its name. Its the rule of law that is important for order in society, to be overturned by neither a fascist power hungry state nor an unconstrained oligarch controlled market.

The choice is yours Sebastian but your current enemies are all, sadly, myths.

@jquiggin
Having generally observed the 1 comment/day limit, I must say it is difficult to face my accusers with such a handicap.

As for my snarks, well, let’s just say that I don’t expect anyone on this blog is going to change their mind about anything, so can’t really see the point of arguing delicately. Although rest assured, when debating in person, face to face, I let my inner loveliness shine through, to charm and disarm my opponents.

I well and truly realise that I’m on the losing side of the debate, despite the fact we’re a lot closer to being correct. Of course, correctness has never been a prerequisite to winning a debate of this sort (case in point – the New Deal ending/mitigating the Great Depression). I guess most people are willing to suspend rationality if they get a slice of government largesse out of it.

As for the libertarian version of the communist argument, I remain a skeptic with respect to free markets, although this skepticism is heavily outweighed by my repeatedly justified skepticism about governments. With respect to the 1890s Australian depression and the post to which you linked in one of your blogs, it was at its heart based in skepticism. The question was if there were any references available from a non-Keynesian viewpoint (of which there is a utter dearth). Generally those that write on this topic are all a bunch of New Deal loving state-worshippers, which immediately rules them out as being in any way objective.

The claim is almost but not quite correct. The material and political pre-requisites [material abundance, incipient dissolution of class society on a world scale] did not (and still do not) obtain. That’s why it ‘wasn’t tried’. It couldn’t be. Claims that it was on the agenda were pure demagoguery on the part of autocrats.

What occurred instead were a series of reactive populist garrison states, always in response to the complete failure of the existing ruling classes to maintain the coherence necessary to foreclose chaos. Since in each of these jurisdictions, there was no sustained history of bourgeois democratic rule, nor any ubiquitous social foundation for such rule, nor even any institution that could establish the coherence necessary to reconcile the divisions withing the populace, the re-establishment of state power could only be through civil war and direct coercion.

Description in western political discourse of these developments as instantiations of attempts at ‘communism’ or ‘socialism’ is either ignorance or a politcal claim aimed at establishing that the persistent rule of the property-owning classes and their states represent the best of all possible worlds.

And it’s facinating in a really queasy sort of way to watch how Mojib Latif’s original comments about the possibility of atmospheric temperatures possibly staying steady for a time and the media consequences of that have been distorted by the media and the denialosphere. Check out this link http://climatesight.org/2009/10/07/a-pretty-typical-story/

climatesight is a great blog from a Canadian schoolgirl and aspiring climate scientist. Read the tone and style of what she writes. Its comforting to know there are such mature young people out there with their heads screwed on right. Something for us ‘Grown Ups’ to think about.

Sebastian, if you’re going to claim that the New Deal did not have significant beneficial effects during the Great Depression then you have to explain why, when Roosevelt started to reverse the ND in 36-37 in the name of balancing the budget, the economy promptly went into a tailspin once more.
And while correlation/causation is the topic, what is it with the high correlation between Austrianism and rudeness on the intertubes? I think it’s something to do with their embrace of “praxeology” – anyone capable of believing that pure deduction from unverifiable first principles is more capable of producing real-world-applicable results than empirical methods will have no answer to the falsification of their results other than denial and abuse.

@James
A tightening of monetary policy by the Fed in the 1936-37 period (in order to combat rising inflation from the FDR administration’s earlier credit expansion) adequately explains the 1937 recession. This authority came from the Banking Act of 1935, a New Deal program. Given that so many of the New Deal programs consisted of price-fixing policies or cartelisation, I don’t see how they contributed in any way to economic growth.

Contributing to this were various new types of pro-labour legislation that made it more costly to hire workers, and no doubt an atmosphere of business uncertainty played a part. Not to mention new taxes – and of course, one fact that Keynesian economists always gloss over when condemning “laissez faire” Herbert Hoover for trying to balance the budget at the start of the Great Depression, is that he did so not by cutting spending, but by raising taxes! That’s a recipe for disaster, even for Keynesian economists.

If you’re talking about a fall in GDP, well as I recall government spending is part of the national income identity, so cutting deficit-financed spending would necessarily involve a fall in GDP. If your goal is simply to inflate GDP figures for the sake of it, I don’t see how that’s going to actually help anyone.

I’m personally not a big fan of Austrian apriorism (nor their rejection of probability theory, nor their rejection of mathematics/empirical methods) but then again I’d also say that the reliance on econometric methods to extract mangled, spurious results is overrated too.

At any rate, a Keynesian who calls Austrian theories “unverifiable” is a hypocrite, since (as you have just demonstrated) whenever Keynesian methods don’t work, they have the Golden Escape Clause – “they didn’t spend enough”. Japan has been suffering from this misdiagnosis for years now.

Sebastian,
I would not call many of the measures “pro-labour”. It is not “pro-labour” to make it difficult and expensive to hire people. The measures were “pro-union”, and in particular “pro-large union”.

I find the hate has been stirred up Obama a continual revelation. The peace prize has always been a nebulous award – obviously you don’t have to single-handedly create lasting world peace to get it – and it often seems to be given more for a hopeful move in the right direction than for enduring achievements, like you might get in say Physics. However, the decision to close Guantanamo and other torture operations qualifies on it’s own for me, and the withdrawal from Iraq tops it off. I guess that for most of Obama’s enemies these same decisions are just plain crazy, as probably is the idea of peace anyway.

Jim,
The prize is meant to be for accomplishments, not for ideas of what may happen in the future. Nominations closed 11 days after he was sworn in, so the prize has been awarded for the “accomplishments” of his first 11 days? Odd, at best.
As an addition, I would hope that he qualifies as a great peace maker in 4 years from now (or even 8) but after 11 days I doubt he did.

Sebastian
The favourite talking point of the right that the failure of fiscal pump priming to drag Japan out of recession has been refuted by a number of researchers who have found policy was not only half hearted but in fact contractionary through part of the 1990’s.

The following paper by Kenneth Kuttner of the NY Fed and Adam Posen
“Fiscal Policy Effectiveness in Japan” might be a good place to start.

History is not really kind to the anti-interventionist point of view when dealing with severe financial crises. I think the reason there are few (if any) references to the 1890s depression by anit-interventionists is that they can’t point to government intervention as having caused or prolonged the experience. In fact the whole episode highlights the short comings of the non-interventionist case.

@Jack Strocchi
Shrub was the least popular president of the US since the inception of polls. What on earth leads you to believe he’d have been reelected if the 22nd amendment hadn’t made him ineligible, Jack?

There’s no way the Repugs would even have noiminated him Hal. They went out of their way to dissassociate themselves from his misrule even prior to September 15. After that, the fact that he was in his last days meant that he was proptected from further decline, but if he’d been dunning, it’s doubtful he’d have managed 100 in the college.

I don’t think Jack’s point is that Bush would have been re-elected if he had been eligible for a third term. His point is simply that given that Bush was ineligible to run anyway, Obama achieved nothing in terms of getting rid of Bush.

Monkey’s Uncle, a quick glance of the USA Today/Gallup poll dated 2-4 November 2007 shows Bush’s overall job approval rating was at 31%, with a 64% disapproval rating. On those figures one could say Bush was terminal.

Actually though this means the 22nd Amendment was moot since there was no circumstance in practice in which Bush could win, and indeed, he’d not have been nominated.

It is true that anyone would have defeated Bush in the circumstances, but there was the possibility that John Claytons Bush McCain could have won and essentially continued Bush’s agenda, possibly have died in office and handed over to Palin with even worse consequences than Bush could have fashioned.

Obama defeated Bush’s proxy and promised a new and improved relationship with the rest of the world. He did withdraw those missiles in Poland. He did begin getting troops out of Iraq. He did begin a respectful dialog with the Muslim world. He has foreshadowed something McCain would not have — reducing nuclear arsenals. He has foreshadowed removing discrimination against gays.

I have misgivings about the award, but then again, what point is an award like this after you have succeeded. You need the heat when the matter is still in the balance and you have someone who might make it happen. If that gets us over the line with a resolution of the Palestinian problem and serious cuts in nuclear arsenals and Gitmo closed and robust Climate Change action on a world scale bedded down well then I won’t quibble.

gerard,
The funny thing is that his nomination was made and accepted at 11 days.
He has announced a lot of peace policies, but there have been no actual accomplishments yet – never mind at 11 days. It’s a farce, and one the committee I think will regret.
Still – they gave one to Kissinger. There is hope.

@sdfc
sdfc – perhaps you also needed to remind Seb that the fiscal pumps were not brought out in fighting the Japanese recession initially but ONLY when Monetary policy failed to have any effect whatsoever…

so argument from some “that fiscal policy failed Japan” is yet another attempt at information twisting..bot monetary policy and fiscal policy expansions were applied. The discount rate was lowered from 6% in 1989 -90 to 0.5% by 1995. The fiscal spending programs were not even implemented until 1992 and income tax cuts werent introduced until 1994. So the information you have is not quite correct – that is, fiscal policy followed an extremely low interest rate which also wqasnt having much effect.

the GOP is the world’s most concentrated, powerful force of political insanity in the world.
at 11 days he had, at least, kept 73 year old “bomb bomb bomb Iran” McCain and Sarah “Rapture” Palin away from the Red Button – that’s got to be worth something, right? they might have made the nomination expecting to wait and see how things turned out by October. from the shortlist I think Hu Jia was the a much more worthy choice. but look, Bush’s war crimes killed a million people and gave torture pride-of-place in foreign policy, and the Republican Party has by this time gone so far off the deep end that they make even Bush look moderate. as I said earlier it’s actually a “F#ck You” prize from the civilized world to the Republican Party, that’s not a complete farce, too soon for sure, but the committee leader did say something to the effect of “several years from now it could be too late”… i.e. “lots of teabagging crackers have guns”

@gerard
Gerard – Shouldnt that be Sarah “Raptor” Palin (small brain large claws?)? Yes – Obama sure does deserve the nobel. I think he deserves it. Im not so sure about the financial reforms though…I dont see much joy there yet.

@Alice
Alice, you’ll appreciate the fact that Sebastian is presumably still limited to one comment a day, and can’t answer these questions.

Although, from the looks of things, he would point out that your argument follows the stock-standard Keynesian “they just didn’t spend enough” argument. As for monetary expansion, I’m sure you would know enough from your readings to note that monetary expansion in the absence of any increase in real savings isn’t going to do much good, i.e. it does little to resolve the problems related to misallocations of capital goods, and little to mitigate the painful period of readjustment.

Fran,
Perhaps the sarcasm was a little weak.
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gerard,
The vote of the American people is what kept McCain and Palin out of the White House. On that logic you would have made the award to each and every Democrat voter in the USA.
It may be that in four years he has achieved much and, if he was a little behind in the polls to candidate Palin (or whomever else), then the Nobel committee may have thought that a little push from them may have helped. This is not going to achieve anything. A complete and utter waste.

Abstract:
This paper first summarises Japan’s fiscal policies in the 1990s. Then, we investigate the macroeconomic impact of government debt and the sustainability problem. We find that the Keynesian fiscal policy in the 1990s was not effective and fiscal sustainability may therefore become a serious issue. We also estimate the optimal level of deficits and evaluate fiscal reconstruction movements. It is shown that the actual deficit exceeded the optimal level in the late 1990s. We then inspect fiscal reconstruction movements in the Hashimoto Administration in 1997 and find that the major factor of recession in 1997 was not fiscal consolidation. An important lesson from Japan’s fiscal policies in the 1990s is that long-run structural reform is more important than short-run Keynesian policy.

The vote of the American people is what kept McCain and Palin out of the White House. On that logic you would have made the award to each and every Democrat voter in the USA.

I believe Obama anticipated this proposition when he said:

This award — and the call to action that comes with it — does not belong simply to me or my administration; it belongs to all people around the world who have fought for justice and for peace. And most of all, it belongs to you, the men and women of America, who have dared to hope and have worked so hard to make our world a little better.

You add:

It may be that in four years he has achieved much and, if he was a little behind in the polls to candidate Palin (or whomever else), then the Nobel committee may have thought that a little push from them may have helped.

Fran,
I think you under-estimate the US people in there.
To me, you under-estimate them when saying that the award in (about) 3 years (not four – error on my part) would be the kiss of death – they are actually very proud when one of their people is seen to be doing well internationally. The award of a Nobel in the lead up to an election would, I think, serve to remind them that there is a world outside the lower 48 and (in the event Obama has done well by then) that they should be considering his record in that world when considering their vote.
Awarding it now I see as the error for the simple reason that he has not achieved – although he has promised – much and that the US people will know this. It just devalues the “currency” of the Nobel to be seen to be awarding it for promises rather than achievements. Over the next 3 years it is possible (although I would think very unlikely) that Obama’s policies will lead to nuclear war in the Middle East. If so, the Nobel will probably lose all possible credibility.
To me, it should be awarded once the impact of policies and actions have had time to play out – not before they have even had a chance to be implemented.
The award to Kissinger, for example, should not (IMHO) have been made when it was, if at all, and should certainly have been delayed until the point where the consequences of his actions, as well what those actions were, was more certainly known than they were at the time.

AR, I’m wondering who you would award the prize to? It’s generally been awarded on recent events. Maybe that’s wrong, but it’s their tradition, isn’t it? A lot of the anti-Obama reaction seems to me to be psychological, like: He’s the target, who cares about the reasons.

Jim: I don’t think that’s quite right in this case. There’s a lot of discomfort amongst people who are well-disposed towards Obama. It sure seems a bit previous to me.

My sense is that the whole issue will cause many to reflect on why the Nobels are of significance, and perhaps conclude that they don’t. Prizes are pretty silly anyway. Bureaucracies always love them of course, but maybe they’ve been outgrown by most of us?

In the US being like by foreigners is very much a mixed blessing, especially for those perceived as “liberal” as this is counterposed to being patriotic, and bound up with fears of cession of sovereignty etc. The timing you suggest would be played as “foreign interference” in US politics and Obama would have to decline it or at least distance himself from it by playing hard to the local peanut gallery, especially if he were behind.

Even now there are elements there who are speaking openly of military coups to deal with “the Obama problem” and taking their weapons along to Town Hall meetings on Health Care, who insist Obama is not a “natural born American” and/or a Muslim/ some sort of “Manchurian candidate”. And you only have to look at the reaction to see how “proud” the right is … they snickered over Chicago missing the Olympics and howled tears of rage than he won the Nobel Prize.

@SeanG
Sean G – Japan suffered in the 1990s from a massive bursting of a real estate bubble… to argue whether fiscal policy or montary policy did or didnt work better in the circumstances is somewhat belated and a bit silly really – perhaps it should have been applied correctly before the bubble got out of hand (hmmmmm….isnt that a bit like the US??).

Knowing when to apply a contraction is harder than knowing when expand..it would seem. The short run policy long run structural policy argument is a nonsense. There are so many markets that were de-regulated or “reformed”(sounds like the Spanish inquisition and probably has similarities) including financial and labour markets in the US and elsewhere in the name of “structural reform”…

but it didnt save them from the bubble did it Sean? – so what exactly was the point of such structural reforms ? Less economic volatility? (no), higher employment? (no), lower prices (how about housing? – no – imports – yes), stable inequality ? (no), lower trade deficits in US? (no), lower budget deficits ? (no).

Hmmm. The clock keeps ticking but the long run gets further away…. not much changes except the latest economic fad. Perhaps we need to get out those “whip inflation now” badges of Carters and start wearing them again.

SeanG, the paper you cite is unsurprisingly is of the view that fiscal policy was ineffective, however its main concern was the debt to GDP ratio which was as much a result of stagnant tax revenue as government spending.

It does nothing to refute the claim by Kuttner and Posen that policy was far from being as stimulatory as the ideological warriors would have us believe.

I merely wanted to show that for every policy paper arguing that Keyneisan pump priming should have been extended there is another paper arguing the opposite.

Japan is a topic that I’d love to discuss for hours on end but don’t jump to conclusions merely show some intellectual humility and recognise that there are people out there who might disagree with you and be able to back those criticisms up.

Fran,
I think that people who think those things are unlikely to support Obama in a pink fit and would be more likely to vote for a small piece of green putty rather than Obama. Those people can safely be written off – just as those that would rather vote for anything with “Democrat” on it can safely be ignored – as long as they turn out to vote. My earlier position stands.
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Jim,
Fair question. Rajapaksa did manage to finish a war, but the methods were sufficiently questionable to put him out of contention. That said, Kissinger keeps raising his head on that, so maybe. It would be difficult to award Suu Kyi again. Prachandra is probably out – that much blood and his attitude are probably not the best, but he may improve in the future. Tsvangirai would have been a brave choice and the money would have been handy. Difficult, but perhaps him. Otherwise, choosing no one is always an option.

Sean, don’t get upset it’s not about intellectual humility it’s about the numbers and the 4 to 5% deficits from 93 to 97 were simply not large enough to be considered hugely expansionary. Of course the major problem was the failure to clean up the banking system.

This is where you and I disagree. I dislike the argument that 4-5% deficit was not enough. When a country triples their government debt as a percentage of GDP and it is claimed that it is not enough, then it indicates a circular argument.

This debate shows the problems I have with economists: they revert to their own bias when offering solutions to economic problems. The stock answer that Alice gives – fiscal spending and regulation – is not the answer for every problem in the world.

We must look at this logically. What is the problem? Banks with massive bad debts (BTW we are talking about Japan here). What is the solution? Nationalise bad banks and create a separate firm with the bad debts.

What solution did the Japanese come up with and what solution are you advocating? Government spending and tax cuts.

This looks at the symptoms (flagging domestic demand) and not the root cause. Until the mindset is changed from looking at stock answers to tailoring answers specific to the problems then economists will always get into ideological debates.

I understand that you wrote “Of course the major problem was the failure to clean up the banking system.” However, your previous answers stated that fiscal stimulus should have been larger when there is no evidence that it would have solved the massive problems faced at that time.

As I said before – is policy tackling the root cause of the problems or the symptoms?

@SeanG
Sean G – the answer to the problems we have of rising inequality (in this country since the mid 1970s) compounded (or perhaps caused by excessive income accruing to the already rich) is in fact to raise income taxes on the rich and to properly and adequately regulate the financial system and restore welfare safety nets and lower taxes on other classes. In short get the redistribution operating in the after tax system more effectively once more, as it was supposed to do (but has been incrementally attacked by wealthy industry lobby groups).

By raising taxes on the rich to the level of the 1950s we dont need large budget deficits and it would reduce the need for higher taxes on everyone else so you would get your lower taxes (unless you are playing footsoldier to the wealthy). We need as Krugman suggests a new new deal to restore the status of the middle classes and to raise the status of the lower classes in this country and stop the growing elite divide. If you want to be part of the part that calls for reduced government spending just remember there is more than one way to skin a cat and the lower classes and the middle classes have been well and truly skinned in this country and its time to face the obvious.

Roosevelt had to fight for this in the 1930s against a waterfall of powerful objections and we will have to fight for it again but more of the country are in the mood for a fight now than ever before.

@Alice
Alice, Roosevelt put income taxes on the wealthy up to 90%. I think that borders on almost complete expropriation of property, which of course is one of the reasons the Great Depression dragged on for so long. Why bother contributing anything to society if the fruits of your labour are going to be forcefully taken and devoted to some pointless boondoggle or social programme? And Roosevelt didn’t fight for anything, he just threw tax dollars around until he got his way, by buying up support in Republican states and setting the IRS on his political opponents – he even tried packing the supreme court. He remains a taint on the office of president, and one of the worst presidents in US history, whose legacy we would be wise to forget.

By the way, there are already welfare safety nets and regulations, they haven’t disappeared – in fact, they’ve been expanded and bloated to massive proportions.

As for the growing gap between the “elite” and the “poor” and your playing the politics of envy, you’ll find that the so-called educated “elite” are the ones that are best able to utilise the advances in technology that have so significantly improved our standard of living, and that’s where their higher earnings come from. In fact, I’d argue that it’s time the poor got off the booze, took better care of their children, stepped up to the plate and did their fair share, instead of just relying on government taking from someone else to give to them. That, to me, is facing the obvious.

Sea-bass, maybe I should have added that the top marginal rate income tax rate of 90% was implemented after the start of World War Two when the US economy converted from peacetime to a wartime economy in 1940.

Yes, MoSH – and 79% is just so reasonable and not a disincentive to further effort at all. The UK 99% rate made perfect sense as well. Perhaps once we get to $100k per annum the rate should just be 100%. No-one could want more than that, surely.

At no stage did I say fiscal policy should have been larger. That is a point of view that some hold, however I’m not sure of how effective a larger stimulus would have been without the required restructuring of the banking system, remembering that credit is the life-blood of the modern economy. I was saying that using the Japanese experience as a stick with which to beat advocates of fiscal stabilisation is flawed.

Cleaning up the banking system and fiscal stabilisation are not mutually exclusive. I am more concerned with the damage caused by easy money, if I had my way central banks would clamp down on credit booms before they got out of hand.

Domestically, I’m far more concerned over household debt sitting at 150% of disposable income than what is very a manageable level of government debt.

@Michael of Summer Hill
Yes, Michael of Summer Hill, although technically true I admit that I cited the 90% rate to strengthen my case (not that 79% isn’t bad enough, and Roosevelt actually proposed a 100% tax rate on all income above $25,000 at one point). It would be interesting to see what actually happened to tax revenue at that point. I don’t think it helped “laissez faire” ideologue Herbert Hoover when he made the dastardly decision to balance the budget by raising the tax rate from 24% to 63%.

Of course, I’m pretty sure it reached 90% again under Eisenhower.

@sdfc
In response to your earlier comment regarding monetary expansion: yes, I am fully aware that monetary expansion is a prescribed Keynesian “solution”. But you seem to have disregarded the reason for the tightening of monetary policy, which was to deal with inflation. This happened in the middle of the Great Depression, leading to the great recession of 1937 (this was of course compounded with continuing tax hikes and pro-union legislation). From your post above you seem to recognise that easy credit has adverse consequences, and yet you seem to hold the contradictory belief that adopting an easy money policy in the midst of a recession makes it all ok. For the record I do not subscribe to the Bernanke/Friedman “monetarist” view that the Great Depression could have been averted by simply increasing the money supply, if they did I would say they were simply postponing the inevitable.

Yes Roosevelt put the taxes up on the rich but why so worried – he took a few years to raise it to 90%. By the 1950s the poorer and the middle classes had gained in real terms (they needed to). The rich on the other hand had lost in real terms. They lost their long island estates, mainly because theyc ould no longer afford the armies of servants needed to run them. Now thats a real shame isntn it?. Its like taxing Rupert Murdoch 22 million times 90 percent. That leaves old Rupe 2.2 mill a year to live on. He wont starve.

What isnt a shame of these so called “wealth misappropriations” is that entrepreneurialism didnt die and the economy boomed in the US after Roosevelt and more actually trickled down from Roosevelts and Trumans policies than anything popularist force fed the citizenry since Nixon (tax cuts to the rich trickle down – no they dont).

@Sea-bass
says “Alice, Roosevelt put income taxes on the wealthy up to 90%. I think that borders on almost complete expropriation of property, which of course is one of the reasons the Great Depression dragged on for so long”.

Ill say this. Ive heard everything. The reason the depression lasted so long is because no one reigned in the gambling elite before the 1929 crash and like the GFC they crashed the damn economy stupid.

Roosevelt got out of control people like you (Sea Bass) back on track. You wouldnt know the woods for the trees.

Did you ever think that there was a booming economy because the US had all this extra capacity from WW2? New technologies developed by both private and public sector to take on the Germans, Japanese and Italians? Or how about women having a larger (relative) role?

@Michael of Summer Hill
Moshie – you are right Sea Bass doesnt know what he is talking about. Taxes on the rich went to 70% under Roosevelt but it wasnt intil the 1950s they hit 90 percent to help pay for the war.

So what??. We started causing problems for various advanced economies when they started dropping those tax rates on the wealthy and ignoring tax systems as a genuine redistribution device and now as a result, we risk being taken over by a bunch of greedy excessive oligarchs who would happily bankrupt, impoverish and starve others if it meant they paid a percent more tax (ANYWHERE) and they still scream for tax cuts and no government. Well all I can say is listen to those ideas at your own peril. They would restart slavery if they could make a buck from it. Im just not certain our government hasnt been bribed to the hilt by them as it stands now. Am I cynical?? More than….who is there in politics brave enough to stand up to these low lifes as Roosevelt was??? Who??

Sea-bass, before the US entered the Second World War increased defense spending and the need for monies to support the opponents of Axis aggression led to the passage in 1940 of two tax laws that increased individual and corporate taxes, which was followed by another tax hike in 1941. But it wasn’t until the end of the war that income earners over $1 million were slugged a top rate of 94%. I’m stuffed have a good night’s sleep.

I did think about that for two seconds Sean. New technologies raised incomes you say? Wait a minute Sean. Wasnt it new technologies that lowered wages after the 1980s when new technologies suddenly demanded skilled labour and divested low skilled labour?

So in one breath you say new technologies raised incomes and in the next someone else new technoly lowers incomes? ?A new technology for all seasons and all reasons?? Make up your mind which way you are going with new technologies because mostly the new technology argument is a load of old horse manure….

What made incomes higher was legislative protection of labour and unions Sean. Thats why the rich hate unions. Labour gained and capital lost in the years from 1930 to 1950-60. Its about time it happened again unless we want to bankrupt the country by letting the greedy elite have it all their way, as we have been doing.

@Alice
I’m going to assume that I’m out of the clink and that JQ will let me post more than once a day provided I don’t get too snarky.

You’ve presented SeanG (although I think your last comment was aimed at me as well) with a false dichotomy. Nobody is saying that new technology reduced wages. What I was alluding to is that the rise of the information technology sector has allowed the wages of skilled labourers to rise rapidly in comparison with unskilled labourers. There’s nothing intrinsically evil about that – why should someone be paid more for a job they don’t do as well as somebody else? Besides, inequality is always blown out of proportion, and wage statistics are subject to significant downward bias.

You’ve obviously been subscribing to Krugman’s (and most probably JQ’s) nostalgianomics. I was barely old enough to remember the 80s, but I can’t see why everyone’s complaining – were the 50s, 60s and 70s really that good? I doubt it. You oldies will just have to get used to the fact that we live in a competitive world, and that Keynesian fiscal-coddling will not absolve you from rising to the challenge.

“Labour gained and capital lost in the years from 1930 to 1950-60.”

Lay off the Marx. And any fool can tell you that unions push up wages, leading to involuntary unemployment, which leads to the greater employment of capital in these industries, increasing its price and diverting it away from other industries. While I support an individual’s right to join a union, giving them to much sway is bad for everybody except the union workers lucky enough to have jobs.

In the end of the day, capitalism and the free market is about creativity and innovation. These are antithesis to a Keynesian economy which has to be command-and-control by nature.

Look at the facts. In the 1990s Japan responded to a banking crisis by turning on the taps of both fiscal and monetary policy. Very little effect. Very little change. Effectively two lost decades.

1970s had a Labour Prime Minister in the UK basically say that pump priming does not work. This was because the Government had regulated the economy into the ground and needed to go to the IMF cap-in-hand.

1930s saw a fiscal expansion that did nothing to stimulate the economy. How many years does it take to run deficits?

The Keynesian argument does not work because it is predicated on endless gorging and does not take into account of the natural economic cycle. An example is the rhetoric that the stimulus package (in the US) has not worked so the government needs to borrow and spend more and do so again and again. This ignores the economic cycle and it assumes that the public as opposed to the private sector can grow.

Finally… when the government borrows there must be a person or people willing to lend. Once they stop doing that then no matter how many research papers are written by academics – you ain’t go not money left for a stimulus unless you take the Argentine option.

@Sea-bass
With a name like Sea Bass how could I not know it was you SE BAS!!! (TIAN)!!
I should have known you would get out of the clink sooner or later – dont be too concerned about your criminal record. There are a lot of fish in the sea that John West rejects.

But you cant keep throwing old fishy arguments around Seb – The Keynesian intervention and controls implemented after the great depression not only saved us from becoming a grossly unequal society Seb, as was teh case before the great depression, and has been happening since the mid 1970s with the rise of the hard right amongst the conservatives not only in the US but also here (thanks to some generous funding by wealthy families, donations deals for politicians, think stink presses, media manipulation and indeed media moguls from the same elite class that benefitted from hard right agendas, and an entire industry and nation wide political and economic scam, but im over it and so is everyone else.

Seb – you are on the losing side now. You may wish to stoke your credentials in the conservative (no hard right liberal party)by throwing the best and the most untruthful propaganda around in JQs blog (is this some sort of training ground for baby barracudas??) to see what sort of job it can land you in industry as it so often does but it wont help when the voting tide changes Seb, against the liberals with their free market policies. It is changing Seb. Be careful you dont get stuck gasping in the mudflats, later to be marked as a crank.

Ultimately good policy will prevail and all the well funded dirty tricks of the hard right (like attacking the moderates in their own party by funding challengers) will be seen by the electorate for what they are. An agenda aimed to reward the already very rich at the expense of all other classes in Australian society.

No one can ignore the growing inequality any longer where only the very richest have made any real gains over the past thirty years Seb. Do you think people dont know how hard it is to buy a house now?? Ask the young, ask the middle classes and go ask the upper middle classes Seb (and the more who lose their house in Australia – the less are going to vote for the liberal party).

The more who are intimidtated by their employers due to growing casualisation and exploitation, the less are going to vote for the liberal party.

The snatch and grab thieves riding at the very peak of the inequality tsunmai only have further to fall Seb. No point swimming with them.

@SeanG
Both of you SEA URCHINS – the new command economy is run by the hard right posing as the moderate conservative parties (liberal in Australia, Republicans in the US). The right commands run like this “we command you all to believe the lies we publish. We command you beleive that by working more insecurely and for less hours we (white man) will be “richer.” We command that you buy our economics only from Chicago “Untruth” University.

The only balance that exists is provided by Fed labor here (exclude the bunglers in NSW state) and the democrats in the US. These are the parties who are balanced and moderate and progressive and have more to offer to offer the majority (not the elite minority you suck up to) and more to offer to protect capitalism than the nonsense proclamations from the commanding heights of the right …the hard right has hijacked conservatism from the conservatives and it doesnt exist in the right any more. It exists in the centre where it has always existed.

Im waiting for the little blue book to be printed by the right . “Thou shall not watch anything except Murodch. Thou shall not read anything except Murdoch. Thou shalt especially not think unless Murodch says so.” “Though shall destroy all governments”. “Thou shall hate all unions.” “Thou will not complain when all public services are sold off and your children cannot be educated and your parents cannot access healthcare.” “Thou will not object to tax loopholes for corporations or gross CEO remunerations”. “Thou shall admire the thieves and the frauds in the financial markets for they are clever entrepreneurs.”

If the ideas of the right were any damn good people may have noticed they were getting better off…except 99% are no better off since the ideologies of the hard right commanders took over and they actually know it.

Time the ultra rich paid more (much more) taxes so they had no money left to fund stink tanks. A message for the very rich (and the hard right – same same) from the truly balanced among us – Work hard pay your taxes and stop paying other people to whinge, lie, cheat and steal for you.

you say “Lay off the Marx. And any fool can tell you that unions push up wages, leading to involuntary unemployment, which leads to the greater employment of capital in these industries, increasing its price and diverting it away from other industries.”

It isnt Marx BTW. Its econ 101 which is a croc anyway. Unions had a very important role. Unions prevented the CEOs paying themslves in multiples of millions of dollars unless they wanted troubles from the men on the floor.

Legislative protection is needed omce more for peoples rights to join a union and not be exploited and not be illegally fired for doing so. Gillard unwound partially the little rodents workchoices but she hasnt gone far enough. Something needs to be done to stop the erosion of labour rights by stopping the casualisation tidal wave. Otherwise the growing and already obscene inequality will only get worse and we will end up with one of these wealthy long lunchers running the country with an army of underpaid apes at his disposal..

It was labour protection that also stopped exceutives getting so fat and out of control like useless… Sea… Blubber…and workers ended up with more of the profits they (CEOs) have seen fit since the mid 1970s to increasingly redirect to themselves ie mostly the top one percent (do you really know how few that is and how much of the income they control…

Sea_bass & SeanG, history is on Alice’s side and you do tend to generalise a lot which is of little value to anyone. Maybe you should do some reading as to why farmers and workers in ie the US united forming syndicates during 1800s before you keep on raving. And don’t blame the unions.

@Michael of Summer Hill
Moshie – Sea Bass cant recall the 1980s. That says a lot and yes both of themm need to get their history from unbiased readings and they have a lot of reading to do because they keep slipping up.

Those who earn top incomes can pay more tax comfortably and need to pay more to correct the upward trending inequality. There is currently some tax break for high income earners on capital gains meaning they only get taxed at 15% anyway which is less than the rest of us. It costs the US Govt 6 bill a year. Of that 6 bill, 2bill goes straight to approx 26 individuals. 2 bill would go a long way towards schooling or health a lot of children. That is evil. No other word for it. And yes the finance industry, as noted by Soros who did actually work in it for damn near half a century, was strictly regulated at the end of WW2 and we managed to avoid major cyclical crashes for decades. As he notes a crescendo of de-regulation came in the 1980s (which Sea Bass wouldnt recall) not helped at all by fundamentally flawed models that assumed financial markets adjusted to equilibrium on the basis of rational expectations and perfect information (assume LTCM and black scholes). I doubt any trader would have really subscribed to this nonsense for long but the economics profession ensured it got built into the models and have been clinging to it ever since. Then banking crises started soon after the rush of deregulation with the 1980s banking crisis and continued. As Soros notes market fundamentalism or same old 19th century laissez faire capitalism resuscitated (which is the just another empty ideology as communism or nationalism or any other ism is) reared its ugly head and Soros is firmly of the view that the financial markets need regulation.

Why would I subscribe to both your inexperience… Sea Urchins? You only have three degrees of argument (no regulation, union horror stories, and wailing about government). So I suggest you put it on the reading list.

Actually I like Soros view of economics…Im inclined to think demand and supply arent stand alone either and perfect information is not at all guaranteed, if we really want to fix the models to be more like the real world, thats where we need to start. At the beginning with the basics instead of building shiny glass empires on fundamental errors. Soros is right. Never have I read a truer commentary. What we have tried to fit to the financial markets is pretty two dimensional mathematical models that dont work.

Im more than a bit embarrassed at the profession of economics..but not as embarrassed as I am at the mindlessness of those who thought we could happily keep de-regulating in what was essentially laissez faire (I wont call them economists – they dont even deserve the title).

Yes, I’ve heard all about the Golden Years of the 50s and 60s – my grandpa tells me that everything was hunky dory out in Broken Hill working the mines, until they introduced machines that could do the work of several men and hence jobs were lost and that means modern technology is a curse and that things aren’t what they used to be blah blah blah. Great guy, but really sticks to the luddites’ fallacy. If those days were really a workers’ paradise, and given that lifestyles today are pretty decent, there would have been no need for progress.

For the record I am registered with the LDP, and have never voted Liberal.

As for Keynesianism reducing inequality, I always thought its raison d’etre was stimulating economic growth? Keynesianism prescribes nothing with respect to inequality, which is more a moral question than an economic one as far as I’m concerned.

And while you complain about CEOs paying themselves millions of dollars, who don’t seem to have any complaint with multi-millionaire union leaders. Also, I would like to point out that I have never denied that people should have a right to join a union, but likewise compulsory and closed-shop unionism are a violation of basic human rights and the right to freedom of association. Labour has the right to accept a job and be remunerated on the agreed terms, and they have the right to withdraw their labour when they are not satisfied with the price. That is a much better system than centralised wage-fixing and letting unions run riot with wage breakouts and mass unemployment.

And no economist to my knowledge ever assumes perfect information, and if they did they would be laughed out of the profession. Even libertarians know that the market isn’t perfect, and sometimes fails, even those that believe in Say’s Law understand this (and they have a better understanding of recessions than Keynesian quacks, who don’t even understand Say’s Law). At any rate, given imperfect information, why do you assume that government is somehow omniscient and can effectively regulate the markets?